Amazon India seeks out Ashok Patni group for joint venture

Amazon’s search for new partners comes at a time when the government may enforce the regulation on how much a single seller can contribute to a marketplaceSupraja Srinivasan&Mugdha Variyar | ET Bureau | September 25, 2017, 08:48 IST

(Thinkstock Images)

Amazon has established a joint venture with the Ashok Patni Group to strengthen its customer service unit or call centre targeted at supporting the growing number of local-language customers as the online retail giant expands deeper into India.

The joint venture, in which Patni holds a 51% stake, could also set up a subsidiary that will act as a seller on the Amazon India platform, similar to the Cloudtail JV with Infosys founder NR Narayana Murthy, said two persons briefed on the matter.

Frontizo Business Services has already started operations in Bengaluru with an investment of Rs 197 crore from Amazon Asia Pacific Holdings and Patni’s Zodiac Wealth Advisors LLP since June, according to Ministry of Corporate Affairs (MCA) filings seen by ET. Ashok Patni was one of the promoters of Patni Computers, which was acquired by buyout major Apax Partners in 2011.

Vinod Kumar, who was until recently a senior manager at Amazon India, is CEO of Frontizo. Kumar had spent a decade at Capgemini’s BPO unit till 2015 as a director before joining Amazon India.

While Amazon India declined to comment, a spokesperson for Frontizo Business Services confirmed the development, adding that the mission of the venture is to “transform how India buys”.

“It is estimated that there are more than 450 million customers with Internet access in India. Only a handful of them shop today through ecommerce sites. Majority of these new customers will come from small towns and rural areas and will have different needs like vernacular language support and alternate operating models to serve them,” said the spokesperson in an email. Frontizo offers multi-channel customer support services, including email assistance, customer outreach and contact on the phone and chats, the spokesperson said.

The joint venture has five directors — three representatives of Patni and two of Amazon. According to the MCA filing, Amazon’s director of category management Sameer Khetarpal and general manager Rajarshi Guin are on the board of Frontizo. Others include Ajay Mahipal, who heads investments at Patni’s healthcare venture Currae Healthtech Fund, and Essaji Vahanvati, former partner at law firm AZB Partners and son of former A-G Goolam Vahanvati.

The development comes as Amazon is actively expanding by tying up with prominent business houses in India, giving them an exposure to the ecommerce space while also bringing on board potentially large sellers. Amazon said on the weekend it will pick up a 5% stake in Shoppers Stop and also signed a commercial agreement under which the retailer is expected to become a seller on the platform. ET reported in July that Amazon is in talks with fast-moving consumer goods major Dabur’s promoters, the Burman family, to set up another Cloudtail-like joint venture.

BID TO IMPROVE POSITIONING“The partnerships (that Amazon is setting out to forge) are less about capital and more about what the partnerships do to improve their positioning in India,” said Vinod Murali, managing partner at venture debt firm Alteria Capital.

“Shoppers Stop has the right offline expertise, Patni Group understands how to run good operations from a customer calling and customer engagement perspective. It also gives them credibility.”

Amazon has committed $5 billion to emerge as the market leader in online retail in India as it looks to dislodge Flipkart, which has raised close to $4 b this year from Chinese Internet conglomerate Tencent and Japan’s SoftBank.

Amazon’s search for new partners comes at a time when the government may enforce the regulation on how much a single seller can contribute to a marketplace. In March 2016, the Department of Industrial Policy and Promotion had capped this at less than 25% to end the monopoly of entities floated by marketplaces to circumvent rules on 100% FDI in retail. Both Flipkart’s WS Retail and Cloudtail India on Amazon were impacted by this rule, spurring the marketplaces to create other entities.

Amazon India promoted a number of new independent sellers during this period, especially moving smartphones, which account for a large share of gross sales, away from Cloudtail. Flipkart and its group fashion portal Myntra saw the emergence of sellers like SuperComNet owned by Shreyash Retail, OmniTech Retail owned by Consulting Rooms and RetailNet, which is owned by Tech Connect Retail. Flipkart does not have any direct shareholding in these units.

“DIPP is enforcing the regulations very strictly, which could be pushing Amazon to look at creating more seller entities that it can control,” said Satish Meena, senior forecast analyst at Forrester Research. “Amazon seems to be looking to create these seller entities to ensure control on sales and shipments.

It is likely that these two three entities will account for 60-70% of Amazon’s sales. These JVs might be focused on one category or an overall level, like Cloudtail.”